Oman prepares for a busy 2012

19 January 2012

Sultanate has a number of high-value projects coming to market in the next 12 months

Oman’s oil, gas, petrochemicals and industrial sectors have $22bn-worth of projects at the study, planning, design or engineering, procurement and construction (EPC) stage, according to the Middle East projects tracker MEED Projects.

The figure is up from $13bn in June 2011 and reflects some of the major projects that have been earmarked for 2012 (MEED 8:6:11).

Oman oil production
YearThousands of barrels a day
Source: BP

The one project that is dominating the oil and gas sector is BP’s $15bn Khazzan tight gas project. The scheme is due to release tenders for a number of key EPC packages in April. BP will then use the commercial and technical bids to formulate a production sharing agreement with Muscat.

“The [BP] project is going to tender in April, but no work will start until the end of the year at the very earliest,” says a Muscat-based contracting source. “It is asking a lot of contractors to spend money on submitting [EPC] bids in 2012, when they may not see a return for a year, but the size of Khazzan makes it worth the risk.”

Other notable upstream hydrocarbons projects include the US’ Occidental Petroleum and the UAE’s Mubadala’s $500m Habiba Area Block 62 exploration, which is due to be tendered in the second quarter of the year.

In the downstream sector, the $1.5bn upgrade of Sohar Refinery by Oman Refineries & Petrochemicals Company (ORPC) is due to tender its EPC packages in the second quarter. Awards are expected to be made by the end of the third quarter.

The rest of the petrochemicals sector is still quiet in Oman with investors waiting to see if there is an improvement in the gas situation before they commit to projects.

The sultanate’s metals sector is beginning to experience an upward trend with various schemes coming to tender in 2012.

The largest is Sohar Aluminium’s planned $2.4bn phase II expansion at its smelter. Prequalification for EPC should start in the second quarter, with tenders due to be released in the third quarter.

Other projects include a planned $600m phase III expansion for the Shadeed Iron & Steel plant, as well as the Bahrain-based Gulf United Steel Holding Company’s $700m steel pelletising plant. Both projects are in Sohar and both are planning to tender EPC in 2012.

As the GCC hydrocarbons and industry sectors begin to shrink, Oman has maintained momentum and has a number of megaprojects ready to move to construction.

Oman’s oil and gas sector is expected to remain buoyant due to the investment in enhanced oil recovery that its matured fields now require. However, the prospect of massive investment in gas projects is a new phenomenon and experts predict that gas will overtake oil as Muscat’s major priority in the long term.

This is a positive step because when the sultanate has enough gas, the investment in other heavy industries will definitely come.  

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